Shell sets up regional treasury centre in Labuan

Shell Malaysia has chosen Labuan as the location for its regional treasury centre, and looks to eventually expand its treasury services to other Shell Group Companies.
Shell Malaysia has launched a regional treasury centre (RTC) in Labuan, following an announcement to invest M$20 billion ($5.26 billion) in Malaysia over the next five years. Shell Treasury Malaysia (L) Ltd - an offshore company incorporated in Labuan, will conduct treasury services, including cash management, foreign exchange and interest rate risk management for Shell Malaysia, and eventually for the other Shell companies for the Near and Middle East.

"This will allow us to centralize debt funding within a single treasury and tax-efficient lending company for the Shell Group's operations in Malaysia," says Lim Tau Kien, corporate treasurer for Shell Malaysia.

A number of treasury products, including tradeable Islamic bonds, will be used to finance its operations in Malaysia and around the region. 

STM (L) will be a non-profit centre, the aim of which is to provide treasury services on a 24-hour basis to participating Shell companies. "It is the result of organizational reconfiguration and re-design work processes with a view to improving operations, internal and external relationships, and quality support to the various Shell businesses," says Lim. Shell declined to comment on whether any unusual concessions were made by the Malaysian Government in an effort to attract companies like Shell to set up treasury centres in Labuan. Lim believes that other companies in the industry are considering similar initiatives in Labuan.

Labuan was declared an International Offshore Financial Center (IFOC) in 1990 by the Malaysian Government, with an aim to develop a whole new financial infrastructure that could offer the region an entire range of offshore financial services, with an emphasis on Islamic financial instruments. In an effort to attract international companies such as Shell, the government has implemented a number of tax incentives to rival those of their better-known neighbouring RTC host, Singapore.

For example, offshore non-trading companies are not subjected to tax on offshore non-trading activities such as the taking of loans and placing of deposits. Also, no withholding tax is imposed on dividends paid by an offshore company or on interest earned on deposits with offshore banks.

Centralizing operational activities is not new to Shell. ATRACC, Shell's regional shared accounting service unit in Kuala Lumpur, provides services to Malaysia, Philippines, Thailand, Singapore and Hong Kong, and is looking to extend its services to other parts of Asia Pacific. Shell in Miri, Sarawak operates as a regional learning hub to run technical and finance training courses for Shell International Exploration and Production.

STM (L) will commence operations immediately.